BADM LAW & ETHICS

Joseph, Lilith, and Terrance form a limited liability company. Joseph contributes 60 percent of the capital, and Lilith and Terrance each contribute 20 percent. Nothing is decided about how profits will be divided. Joseph assumes that he will be entitled to 60 percent of the profits, in accordance with his contribution. Lilith and Terrance, however, assume that the profits will be divided equally. A dispute over the profits arises, and ultimately a court must decide the issue.

• What law will the court apply?
• In most states, what will result? Why?
• How could this dispute have been avoided in the first place?